HOW TO RAISE MONEY TO START A BUSINESS

HOW TO RAISE MONEY TO START A BUSINESS

The task of raising money for a business is not as diffucult as most

people seem to think. This is especially true when you have an idea

that can make you and your backers rich. Actually, there's more

money available for new business ventures than there are good

business ideas.

A very important rule of the game to learn: Anytime you want to

raise money, your first move should be to put together a proper

prospectus.

This prospectus should include a resume of your background, your

education, training, experience and any other personal qualities that

might be counted as an asset to your potential success. It's also a

good idea to list the various loans you've had in the past, what they

were for, and your history in paying them off.

You'll have to explain in detail how the money you want is going to

be used. If it's for an existing business, you'll need a profit and loss

record for at least the proceeding six months, and a plan showing

how this additioal money will produce greater profits. If it's a new

business, you'll have to show your proposed business plan.. your

marketing research and projected cost, as well as anticipated

income figure, with a summary for each year, over at least a three

year period.

It'll be advantageous to you to base your cost estimates high, and

your income projections on minimal returns. This will enable you to

"ride through" those exteme "ups and downs" inherent in any

beginning business. You should aslo describe what makes your

business unique how it differs from your competition, and the

opportunities for expansion or secondary products.

This prospectus will have to state precisely what you're offering the

investor in return for the use of his money. He'll want to know the

percentage of interest you're willing to pay, and whether monthly,

quarterly or on an annual basis. Are you offering a certain

percentage of the profits? A percentage of the business -A seat on

your board of directors?

An investor uses his money to make more money. He wants to

make as mush as he can, regardless whether it's a short term or

long term deal. In order to attract him, interst him, and persuade him

to "put up" the money you need, you'll not only have to spell it out in

detail, and further, back up your claims with proof from your

marketing research.

Venture investors are usualy quite familiar with "high risk"

proposals, yet they all want to minimize that risk as much as

possible. Therefore, your prospectus should include a listing of your

business and personal assets with documention- usually copies of

your tax returns for the past three years or more. Your prospective

investor may not know anything about you or your business, but if he

wants to know, he can pick up his telephone and know everything

there is to know within 24 hours. The point here is don;t ever try to

"con" a potential investor. Be honest with him. Lay all the facts on

the table for him in most cases, if you've got a good idea and you've

done your homework properly, an "interested investor" will

understand your position and offer more help than you dared to ask.

When you have your prospectus prepared, know how much money

you want, exactly hdow it will be used, and how you intend to repay

it. You're ready to start looking for investors.

As simple as it seems, one of the easiest ways of raising money is

by advertising in a newpaper of a national publication featuring such

ads. Your ad should state the amount of money you want-always for

more money than you need so you have room for negotiating. Your

ad should also state the type of business involved (to separate the

curious from the truly interested), and the kind of return you're

promising on the investment.

Take a page from the party plan merchandisers. Set up a party and

invite your freinds over. Explain your business plan, the profit

potentials, and how much you need. Give them each a copy of your

prospectus and ask that they pledge a thousand dollars as a non-

participating partner in your business. Check with the current tax

regulations. You may be allowed up to 25 partners in Sub Chapter

S enterprises, opening the door for anyone to gather a group of

friend around himself with something to offer them in return for their

assistance incapitalizing his business.

You can also issue and sell up to $300.00 worth of stock in your

company without going through the SEC. You'll need the help of an

attorney to do this, however, and of course a good tax accountant

as well wouldn't hurt.

It's always a good idea to have an attorney and an accountant help

you make up your business prospectus. As you explain your plan to

them, and ask for their advice, casually ask them if they'd mind

letting you know of, or steer your way any potential investore they

might happen to meet. Do the same with your banker. Give him a

copy of your prospectus and ask him if he'd look it over and offer

any suggestion for improving it, and of course, let you know of any

potential investors. In either case, it's always a good idea to let

them know you're willng to pay a "finder 's fee" if you can be

directed to the right investor.

Professional people such as doctors and dentists are known to

have a tendecy to join occupational investment groups. The next

time you talk with your doctor or dentist, give him a prospectus and

explain your plan. He may want to invest on his own or perhaps set

up an appointment for you to talk with the manager of his investment

group. Either way, you win becaue when you're looking for money,

it's essential that you get the word out to as many potential investors

as possible.

Don't overlook the possibilites of the Small Business Investment

Companies in your area. Look them up in your telephone book

under "Investment Services." These companies exist for the sole

purpose of lending money to businesses which they feel have a

good chance of making money. In many instances, they trade their

help for a small interest in your company.

Many states have Business Development Commmissions whose

goal is to assist in the establishment and growth of new businesses.

Not only do they offer favorable taxes and businesses.

expertise,most also offer money or facilities to help a new business

get started. Your Chamber of Commerce is the place to check for

further information on this idea.

Industrial banks are usually much more amenable to making

business loans than regular banks, so be sure to check out these

institutions in your area. Insurance companies are prime sources of

long term business capital, but each company varies its policies

regarding the type of business it will consider. Check your local

agent for the name and directors of another company to invest in

your business. Look for a company that can benefit from your

product or srvice. Also, be sure to chck at you public library for

available foundation grants. These can bet he final anser to all your

needs if your business is perceived to the relataed to the obfictives

and actvities of the foundation.

Finally, there's the Money Broker or Finder. These are the people

who take your prospectus and circulate it with various known

lenders or investors. They alsays require an up-front or retainer fee,

and there's no way they can quarantee to get you the loan or the

money you want.

There are many very good money brokers, and there are some that

are not so good. They all take a percentage of the gross amount

that's finally precured for your needs. The important thing is to check

them out fully; find out about the successful loans or investment

plans they've arranged, and what kind of investor contacts they have

all of this before you put up any front money or pay any retainer fees.

There are many ways to raise money-from staging garage sales to

selling stocks. Don't make the mistake of thinking that the only place

you can find the money you need is through the bank or finance

company.

Start thinking about te idea of inviting investors to share in your

business as silent partners. Think about the idea of obtaining

financing for a primary business by arranging financing for another

business that will support the start-up, establishment and

development of the primary business. Consider the freasibilty of

merging with a company that's already organized, and with facilities

that are compatible or related to your needs. Give some thought to

the possibilities of getting the people supplying your procuction

equipment to co-sign the loan you need for start-up capital. This is

truly the age of creative financing.

Disregard the stories you hear of "tight money," and start making

phone calls, talking to people, and making appointments to discuss

your plans with the people who have money to invest. There's more

money now than there's ever been for new business investment.

The problem is that most beginning "business builders"don't know

what to believe or which way to turn for help. They tend to believe

the stoies of "tight money," and they set aside their plans for a

business of their own until a time when start-up money might be

easier to find.

The truth is this: Now is the time to make your move. Now is the

time to act. The person with a truly viable business plan, and

determenation to succeed, will make use of every possible idea

that can be imagined. And the ideas I've suggested here should

serve as just a few of the unlimited souces of monetary help

available and waiting for you!

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